Affordability is rising in prominence as the industry's average interest rate and transaction price tick up month after month. But despite consumers' drive to get to their ideal payment, lenders are staying disciplined.
Many lenders are capping loan terms, even if it means they lose the sale, or telling customers who owe more on their loans than their cars are worth to stay out of the market longer.
Even with pressure from dealers or consumers, Chuck Berend, director of U.S. auto lending at BBVA Compass, suggests avoiding extremely long loan terms, especially if the customer is already upside down.
When BBVA tells dealers that it wants to cap loan terms at 84 months, dealers often ask the lender, " 'If it's an 800 FICO customer with lots of income, what do you care?' " Berend said at the Auto Finance Summit last month in Las Vegas. "That makes it a little more challenging for us, especially because we can make that decision and then somebody else is going to write that deal. I just don't like financing your last car when financing this car."
Dealers sometimes push lenders into "uncomfortable places" because of short-term pressure on sales volume, said Jim DeTrude, vice president of NMAC sales and marketing at Nissan Motor Acceptance Corp. Discomfort can come from the creditworthiness of the buyer or the length of the loan term, he said.
NMAC isn't facing such pressures from Nissan or Infiniti dealers or from the brands themselves, he said.
"They've dealt with negative equity," DeTrude said. "They feel like they've moved through most of those issues" and have been careful with lengthening loan terms.